Question: What is the cash conversion cycle (CCC)? Why is it better, other things held constant, to have a shorter rather than a longer CCC? Suppose

What is the (CCC)? Why is it better, other things held constant, to have a shorter rather than a longer CCC? Suppose you know a company’s annual sales, average inventories, average accounts receivable, average accounts payable, and annual cost of goods sold. How could you use that information to determine the company’s CCC? If you also knew its cost of capital, how could you determine its annual cost of carrying working capital? How could you determine how much the company would save if it could reduce the CCC by, say, 5 days? What are some action it might take to reduce the CCC?

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